Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether Canco will be considered to have incurred SR&ED expenditures by providing services described in paragraph (d) of subsection 248(1) of the Act to a non-resident corporation ("Foreignco"), in support of activities carried on outside Canada by Foreignco that would otherwise be described in paragraphs (a), (b) or (c) of subsection 248(1) of the Act.
Position: No
Reasons: Paragraph (d) of the definition of SR&ED in subsection 248(1) provides that Canco's support services must be in respect of activities that are described in paragraph (a), (b) or (c) of that definition and that are undertaken in Canada.
XXXXXXXXXX 2002-012272
Frank Fontaine, FCCA
March 25, 2002
Dear XXXXXXXXXX:
Re: Scientific Research and Experimental Development ("SR&ED")
Subsection 248(1) of the Income Tax Act (the "Act")
This is in reply to your letter dated February 8, 2002 concerning whether a Canadian corporation ("Canco") will be considered to have incurred SR&ED expenditures, where Canco provides services described under paragraph (d) of the definition of SR&ED in subsection 248(1) of the Act to a non-resident corporation ("Foreignco"), in support of primary research activities carried on outside Canada by Foreignco that would otherwise be described in paragraphs (a), (b) or (c) of the definition.
Written confirmation of the consequences inherent in particular transactions are given by the Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R4 (the "Circular"). Where the particular transactions are completed or partially completed, the enquiry should be addressed to the relevant Tax Services Office. Notwithstanding the foregoing, we are providing the following general comments:
By virtue of the words in paragraph (d) of the definition of SR&ED in subsection 248(1) of the Act which read "....where the work is commensurate with the needs, and directly in support, of work described in paragraph (a), (b) or (c) that is undertaken in Canada by or on behalf of the taxpayer", the particular activities of Canco would not be considered as SR&ED. The underlining is for emphasis. Accordingly, we confirm the reply given in our opinion letter, document number 2001-0088795 dated September 4, 2001, and agree with your conclusion that Canco would not incur SR&ED expenditures in respect of such activities.
The foregoing comments represent an opinion expressing our general views with respect to the subject matter. As indicated in paragraph 22 of the Circular, the above comments do not constitute an advance income tax ruling and, accordingly, are not binding on the Canada Customs and Revenue Agency.
We trust our comments will be of assistance to you.
Yours truly,
Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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